Gross Rent Multiplier Calculator (GRM and 1% Rule)
The gross rent multiplier is the quickest screen for a rental: price divided by yearly rent. Choose what to solve for, enter the other two values, and check the 1% rule at the same time.
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Formula
GRM = price ÷ annual gross rentPrice = GRM × annual rentAnnual rent = price ÷ GRM1% rule: monthly rent ÷ price × 100 ≥ 1
Worked example
A property costs 240,000 and its rents total 24,000 a year.
- GRM = 240,000 ÷ 24,000 = 10.
- Monthly rent = 2,000, which is 2,000 ÷ 240,000 = 0.83% of the price, below the 1% rule.
- Solving for price with a GRM of 8 and 30,000 annual rent: 8 × 30,000 = 240,000 (1.04% a month, passes).
GRM uses gross rent, so it ignores vacancy and every operating cost.
When to use it
Use GRM when you have only the price and the rent and want a first filter across many listings. Move to the cap rate calculator once you know operating costs, and to the cash on cash return calculator once you know the financing. GRM is a screening tool, not a valuation.
Second example
A 180,000 flat rents for 1,800 a month, or 21,600 a year.
- GRM = 180,000 ÷ 21,600 = 8.33.
- Monthly rent ÷ price = 1,800 ÷ 180,000 = 1.00%, which just meets the 1% rule.
Common mistakes
- Using monthly rent in the formula. GRM uses annual rent.
- Comparing GRMs of properties with very different expense ratios; a building with high taxes can look cheap and earn little.
- Treating the 1% rule as a pass or fail. It is a rule of thumb that depends heavily on local prices and rents.
Frequently asked questions
What is the gross rent multiplier?
GRM is the property price divided by its yearly gross rent. A 240,000 property that earns 24,000 a year in rent has a GRM of 240,000 ÷ 24,000 = 10, meaning the price is ten years of gross rent.
What is the 1% rule?
A rule of thumb that monthly rent should be at least 1% of the purchase price. For 240,000 that means 2,400 a month; rent of 2,000 is 0.83%, so it falls short. It is a quick screen, not proof of a good deal.
Is a lower GRM better?
A lower GRM means you pay less per unit of rent, which usually looks better. But GRM ignores vacancy, taxes and repairs, so two properties with the same GRM can have very different profits. Use cap rate for a closer look.
How do I find a price from a GRM?
Multiply the annual rent by the GRM. With a typical GRM of 8 for similar local properties and 30,000 of annual rent, the estimated price is 8 × 30,000 = 240,000.
What is a good gross rent multiplier?
A lower GRM means you pay less per unit of rent, but what counts as good depends on the market. Compare a property's GRM with the GRMs of similar properties nearby; a building at 10 when comparable ones sell at 8 is expensive for its rent.
How do I convert GRM to cap rate?
GRM is the inverse of gross yield, so a GRM of 10 is a 10% gross yield. Subtract operating costs to reach NOI: if costs are 40% of rent, a 240,000 property with 24,000 of rent has NOI of 14,400 and a cap rate of 14,400 ÷ 240,000 = 6%.
What is the GRM formula in Excel?
Use =price/annual rent. A 324,000 property with 36,000 a year in rent gives =324000/36000 = 9. To find a price from a GRM, multiply: =9*36000. Monthly rent must be multiplied by 12 first.